Heavy Selling in Global Stocks Increases Risk Aversion Boosting Yen
Fundamental Archives |
Written by CMS Forex |
Nov 20 08 21:13 GMT |
Heavy Selling in Global Stocks Increases Risk Aversion Boosting Yen
JPN Trade Balance in Deficit on 7.7% Fall in Exports
Japan's trade balance undershot forecasts, with the seasonally adjusted balance down 180 billion yen. In non-seasonally adjusted terms the trade deficit amounted to a 63.9 billion yen shortfall the third time this year trade was negative. Exports fell 7.7%, the biggest drop since December 2001 while imports grew 7.4%. With Japan's key trading partners facing recessions, or recessionary conditions, demand for Japanese exports is faltering. For example, shipments to Europe plunged 17.2% while demand from the US dropped 19%. These trade numbers bode ill for the export-heavy Japanese economy, which is looking at a weak 4th quarter of GDP growth.
AUD/JPY - Yen Strengthens as Asian Stocks Follow Yesterday's US Losses Increasing Risk Aversion
Markets across Asia posted sharp losses Thursday, with the Nikkei 225 down 6.9% as the trade data added to yesterday's sell-off on Wall Street. The Aussie-Yen pair, usually very sensitive to sentiment in equity markets, sank 300 pips in today's trading and is 530 pips off its high from yesterday near 63.90. Risk aversion was full blown today, helping to boost the Yen against all of its rivals.
GER Producer Prices Remain Flat, Higher Than Expected
In Germany producer prices remained flat in October, defying expectations of a 0.6% decline. Annual prices however cooled to 7.8%, from 8.3% in September.
UK Retail Sales Surprise on Upside in October, Fall "Only" 0.1%
In the UK, retail sales fell 0.1% in October, but that as a much smaller decline than the 0.9% drop expected by economists. The annual rate actually increased to 1.9% from 1.8% in September. Consumers bough more food which offset lower spending on other goods. The better-than-expected headline result masks a very tough retail environment, and the Bank of England seems set to cut rates to 1% after slashing them 150 basis points to 3% last month.
GBP/JPY - Pound Slides vs Yen in the Wake of Global Stock Losses
The Pound-Yen, also a key measure of carry trade, saw an 800 pip slide from the 147.80 level, which corresponded with the slide in US stocks yesterday, and going through today's falls in Asian and European markets. The pair found support at the key level of 139 which has acted as support three times since October 23rd. The pair bounced off this high as US stocks staged an afternoon rally.
SWZ Swiss National Bank Cuts Rates 100 Basis Points in Unscheduled Move
In a surprise unscheduled move the Swiss National Bank slashed interest rates by a record 100 basis points. The central bank has become more concerned over the economic outlook, and does not feel restrained by inflation fears. The move may also be a reaction to a fresh round of stock losses that have again rattled confidence in financial markets around the world. It was the third unscheduled move by the SNB since the beginning of October when rates were 2.75%.
EUR/CHF - Swiss Franc Weakens Following Surprise Rate Announcement
Despite losses in European stocks the Euro-Swiss franc pair rose today after hitting an intra-day low near 1.5125. That was most likely a response to the rate cut by the Swiss bank, as the Swiss Franc usually gains during times of risk aversion and falling stocks. The Euro retested its high from yesterday near the 1.53 level.
US Jobless Claims Climb to Highest Level Since 1992
Weekly jobless claims took another large step backwards as claims rose to the highest level since 1992, as firms lay off more workers in the face of the deepening economic slump. Jobless claims rose 27K to a higher-than-forecast 542K while the total number of people continuing to receive unemployment benefits rose to 4.012 million the highest that figure has been since December 1982.
US Philly Fed Sinks Lower, Leading Index Shows 0.8% Decline
The Philly Fed index fell into further negative territory in November, declining to -39.3. New orders and employment went deeper into negative territory while the prices paid and received gauges turned negative for the first time since 2003. Expectations for future activity slid, suggesting the regions manufacturing activity will continue to decline over the next six months. The Conference Board leading index decreased 0.8% for the month of October as stock prices, building permits, consumer expectations and the index of supplier deliveries made large negative contributions to the index.
USD/JPY - Dollar Falls, Rallies, Then Falls Again vs Yen as Stocks See-Saw Before Failing
Following the negative fundamental data in the US, stocks fell lower with the Dow Jones falling to a six-year low below the 8,000 level. However, stocks managed to stage a rally, with the Dow climbing 160 points higher as of 1 PM EST, which helped reverse some of the risk aversion seen overnight. The Dollar-Yen pair which fell 150 pips from its open to the 94.30 level, rallied 180 pips to bring the pair above the 96 level. However, only a short time later, US stocks fell back into the red moving the pair back in the Yen's favor.
CAN Wholesale Sales Surprise on Upside, Profits up 7.6% in 3rd Quarter
In Canada, wholesale sales increased 1.5% in September, completely reversing the 1.5% drop in August. The increase defied expectations and was fueled by recovery in the automotive sector. In a second release, company operating profits were up 7.6% for the 3rd quarter. Profits in the non-financial sector were up 9.1%, largely due to strong performance by oil and gas extractors and petroleum and coal manufactures.
USD/CAD - Greenback Surges Vs Loonie on Oil's Fall, Risk Aversion
The US Dollar-Canadian Dollar pair, surged today at the start of NY trading as oil fell below $50 a barrel briefly and concerns about a severe global recession, outweighed the positive data from the Canadian economy. The greenback jumped 380 pips to test 1.2940 but then eased in afternoon trading.
Tonight and Tomorrow's Releases
Lets now shift our attention to some upcoming releases. Japan will be deciding on interest rates, though it is expected to hold at 0.30%. Overnight, both Germany and the Euro-zone will release preliminary data on November's manufacturing and services activity.
Tomorrow morning, the fundamental docket is very light with the only significant release being Canadian consumer price data.
